Considering IRS Installment Agreement for Tax Relief
  • December 18, 2023
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If, like many Americans, you also owe back taxes and are not able to pay despite your best efforts, what should you do? The answer lies in many of the provisions offered by the IRS to help taxpayers who are unable to fulfill their tax liabilities. One such provision is IRS Tax Installment Agreement, a monthly payment plan to help you pay off your tax liability in easy monthly installments. 

The IRS offers installment payment plans to taxpayers whose tax bill is too hefty for a single payment. Under this plan, taxpayers can spread their payments over several months to make the bill more manageable. If individuals don’t pay such installments on time, the IRS may seize their property, place liens against their assets, and even garnish their wages. After approving an IRS tax installment or payment plan, the IRS will charge the taxpayer some extra fees. Taxpayers who qualify for a short-term payment plan are not required to pay such a fee. 

Types Of IRS Tax Installment Agreement To Pay Your Tax Debt

Let’s look at five types of IRS installment agreement plans that are available to taxpayers with outstanding IRS debt. Read on!

1. Guaranteed Installment Agreement

A guaranteed installment plan is designed for taxpayers who owe the IRS up to $10,000 in taxes. To qualify for this plan, taxpayers should meet the following criteria:

  • Filed all tax returns in the past
  • Must have paid all the previous returns up to five years on time.
  • Must not have used any other installment agreement within the last five years.
  • Must be able to pay the total debt within three years.

Taxpayers who meet all these criteria can apply for this IRS installment agreement online. They are not required to provide a full financial statement to the government.

2. Streamlined Installment Agreement

A streamlined installment agreement is designed for taxpayers with debts of up to $50,000. Taxpayers can easily qualify for the IRS payment agreement and extend their payments for up to 72 months or six years. Like the Guaranteed Installment Agreement, taxpayers are not expected to provide a full financial statement to the IRS.

3. Payment Agreement for Debts Over $50,000

This settlement plan is for taxpayers who owe more than $50,000 to the IRS and do not easily qualify for the streamlined and guaranteed IRS payment agreements. The IRS thoroughly reviews the financial situation of such taxpayers to make sure they pay the debt off as early as possible. It will also demand that taxpayers furnish it with a financial statement. To avail this plan, it is recommended to get help from a tax professional as they can make sure that the IRS gets all the required financial information and also fill out a Collection Information Statement (Form 433-F or Form 433-A).

4. Partial Payment Installment Agreement

In situations when the outstanding tax amount is hefty and is not affordable, taxpayers may qualify for a partial payment installment agreement. The agreement allows taxpayers to take more time to repay the debt. The IRS will evaluate the financial position of the taxpayer including their equity in assets every two years to check if they are better off. In some cases, taxpayers may even have to sell their property to pay off their tax debt.

Offer in Compromise

The IRS may allow taxpayers who can’t afford their tax installments, even in partial payment installment agreement, to pay less than what they owe under an offer in compromise. To qualify for an OIC, taxpayers must have filed all their past tax returns, made all the necessary tax payments for the current year, and made all federal tax deposits for the current quarter.

Answering 5 FAQs About IRS Tax Installment Agreement

A lot of the taxpayers experiencing IRS tax debt problems consider the installment settlement agreements a relief, but there is a lot of confusion about the program. In this section, we answer five commonly asked questions about IRS Tax Installment Agreement. Read on.

1. Which IRS Installment Agreement Plan Is Right for Me?

There are four types of Installment Agreements. The following gives you a brief idea on your eligibility: 

  • Guaranteed Installment Agreement: Apply for this three-year IA if you owe less than $10,000.
  • Streamlined Installment Agreement: If you owe $50,000 or less, this may be the path for you, and you can pay off your liability in 72 months or less.
  • Non-streamlined Installment Agreement: If you owe more than $50,000 and need a five-year payment plan, this is the right option for you.
  • Partial Pay Agreement: If your total tax debt is more than $10,000, and you are able to make a partial payment, this is the way out.

With the assistance of law experts at The Law Offices of Nick Nemeth, you can assess the most suitable Installment Agreement option for you.

2. Can the IRS levy a property while an Installment Agreement is in place?

The answer is no. The IRS does not levy your property, bank account, or wages if you are in an Installment Agreement.

3. What happens if I miss an IRS Installment Agreement payment?

In case you fail to make payment of your Installment Agreement, you will get Notice CP 523 from IRS mentioning that IRS plans to terminate your agreement and levy your property. This notice may adversely affect your credit score and may cause other financial issues. The best option is to inform the IRS by calling them directly.

4. What are the accepted methods to pay the installments?

Your Installment Agreements for paying federal tax debts can be settled using the following payment modes:

  • Credit cards
  • Money orders or checks
  • Direct bank account transfer
  • Debit from your work paycheck
  • Electronic Federal Tax Payment System (EFTPS)

5. Can the IRS put a tax lien on me if I am in an Installment Agreement?

Yes, the IRS can put a tax lien on your assets while you are in an Installment Agreement to secure themselves against other creditors who take an interest in your property. The total outstanding balance is the deciding factor.

6. Why would the IRS cancel my existing Installment Agreement?

The IRS can do so in the following scenarios:

  • You missed a payment.
  • You did not file for subsequent returns.
  • Your total tax liability increased since you started your Installment Agreement.
  • Your Collection Information Statement (Form 433A or 433F) was incomplete or incorrect.

Wrap Up

It is important to know that the IRS can revoke any installment arrangement if a taxpayer misses a payment, does not file a tax return, or provides inaccurate information on Form 433-F. While it is easy to qualify for an IRS installment agreement if you owe less than $50,000 to the government. To apply for agreements for debts over $50,000, it is recommended to seek assistance from a tax attorney who can help you to successfully apply for the settlement plan and get a proper tax problem resolution. To discuss the best IRS installment agreement for you in Dallas, Texas, simply call the Law Offices of Nick Nemeth at (972-426-2991 or fill out the form fill on our website to schedule a free, no obligation, and confidential consultation with Nick and his team.

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